Even if your Financial House is in order and you're on-track with your goals, accounts and investments (kudos to you for all three!), cash value life insurance is something worth considering. In fact, in a previous posting, I briefly alluded to it as the "Rich People's ROTH."

Many people justifiably have a negative response at the mere mention of "life insurance," whether that's because thinking of dying is a major buzz kill or, more likely, because it conjures up visions of skanky salesmen always trying to push some horrible policy or other onto an innocent populace. But hear me out, I'm not here to sell you anything; as a Certified Financial Planner™ I'm here to inform you of an great tool you may be inadvertently ignoring.

In fact, some of the wealthiest people in America choose to park their hard earned money in an IRS- sanctioned life insurance policy that can allow them to achieve tax-free growth on their investments and tax-free distributions. I call this cash value on permanent life insurance a "Rich People's ROTH" because it's most useful for those whom a regular ROTH just won't cut it. These people include those who make too much money to use a regular ROTH IRA at all, those playing catch-up (which sadly is probably a majority of pre-retirees) and/or for those who have already maxed out their other retirement accounts and want to save more money tax efficiently. While it may sound too good to be true, it is actually a real thing.
Advantages to a ROTH IRA
The biggest drawback to a ROTH (which was named after William V. Roth, a senator from Delaware who was one of the original sponsors of the legislation that established the program in 1998) is also one its biggest benefits. When you contribute to a ROTH IRA or ROTH 401(K) you don't get a tax deduction now for your contributions as you may with a Traditional IRA or 401(K) plan. I'm realistic here, many people just contribute to retirement account for the short term tax break. SAVE MONEY NOW!

On the other hand with a ROTH IRA the money grows tax-free and more importantly comes out tax-free. The farther you are from needing to withdraw funds out of the account, the bigger the tax benefits may be for you. The more time the money has to grow and compound your retirement nest egg, the bigger your potential tax savings when you eventually do use the funds to live in your golden years.
Wealth eligibility snag for ROTH IRA investments
Unfortunately, if you make too much money you can't contribute at all to a ROTH IRA. (For 2016 the limits are $132,000 for singles, and $194,000 for married couples) Likewise if your annual income is $100,000 or more, the yearly contribution limits of $5500 (of $6500 for those 50+ years old) will hardly be sufficient to fully fund the type of retirement you're probably going to want.

People often fall into the trap of "I'm maxing the account, I must be saving enough." While "wealth" is relative as is the definition of a comfortable life, the more money you can potentially sock away, and obviously the more money you will need to sock away to achieve "the lifestyle you've grown accustomed too."

RICH PEOPLE'S ROTH advantages• No contribution limits
Can you imagine if there were no contribution limits to the funds you could put into your retirement accounts? How much more could you save, or would want to contribute? Life insurance has no contribution limits, you can set the policy up for essentially any size you want and the cash value would be treated essentially like a ROTH. That means your contributions will not only grow tax-free but come out tax-free too. Once the policy is in place there may be some guidelines and limitations but those would be based on its parameters, rather than some arbitrary (small) numbers picked by Congress or the IRS.
• Potential for substantial tax-free income in retirement
Once you've maxed your other retirement accounts, you may be looking for other ways to save for future goal in a tax preferred manner. The cash value on a life insurance policy can potentially be a great tool to use to increase your tax-free income in retirement. Just as with a ROTH, the cash value grows tax-free and comes out tax-free if handled properly. Investment options vary by policy, and include conservative options from a fixed return, to equity indexed, all the way up the risk scale to a fully invested variable universal life.

• Health in perspective
I will cover appropriate amounts of death benefit coverage you should have at another time, since this post focuses on the cash value benefit of life insurance, which you don't have to die to use. But your health can an also be an issue for this type of policy and you will most likely have to go through underwriting. The worse your health, the less advantageous the cash value accumulation may be. On the other hand, the worse your health the more you may want and need the actual life insurance coverage to protect your family.

Cautionary last words
These polices aren't for everyone. Insurance brokers and financial idiots have often improperly sold them because of their potentially large commissions, because they as "advisor" are not securities-licensed, or they happen to work for an insurance company. Hello, conflict of interest anyone? But please don't let these bad apples cause you to ignore a potentially valuable tool for getting your financial house in order.

Make sure you actually work with an independent Certified Financial Planner™ and preferably one who is also a Fiduciary. While I believe all people are created equal, I know for a fact that many so- called "financial advisers" most definitely are not. You - and your money, and your future - deserve the smart and ethical best choices and strategies.

Take care until next time when I share more advice to help you BE FISCALLY FABULOUS!